Monday, July 25, 2016

NPS CBA Rule: 3 Houses need 10 Lots

Submissions to the proposed National Policy Statement Urban Development Capacity were due ten days ago or so. It will - of course - be interesting to see what emerges, though the import of that policy initiative is somewhat dwarfed by the public debate that has developed (Grimes, Brash ANZ Bank CEO etc).

Nevertheless, incremental changes will occur, and one hopes these might avoid chaos and catastrophic collapse which will ultimately affect people with little and low incomes far more than the wealthy and even the banks if we are to believe the commentary.

It fell to my lot to do some detailed policy analysis of the proposed NPS. This took me into the 200 page Cost Benefit Analysis (CBA) of policy options prepared for MfE by a consortium of consultancies (including Covec, MR Cagney etc). This was a close typed and rather daunting document, which contained findings I'd like to share with you in this posting.

The announcement of the proposed National Policy Statement on Urban Development Capacity was followed by two significant central government statements relating to urban development. The Prime Minister announced the availability of $1 billion to fund growth related infrastructure (this announcement has been further qualified by the Minister of Environment that this fund could be allocated to the Huapai area of North Auckland). The second statement suggested the establishment of a government run Urban Development Agency in Auckland, with the further suggestion that the agency might have the power to compulsorily purchase land that has been land-banked and is being with-held from development.

It would have been appropriate to incorporate these ideas into the proposed Urban Development NPS. This would have provided an opportunity to consider each of the proposals, and how they inter-relate, in an integrated way, and have led to much more effective national guidance. But I digress, the CBA...

Infrastructure

Most commentators and analysts argue there is a fundamental disconnect between the Local Government Act and the RMA (and the LTMA) when it comes to infrastructure funding and planning. This is one of the key areas that should have been addressed in the National Policy Statement. The NPS presented an excellent opportunity for that. In fact this issue is addressed in the ‘risk of unintended consequences’ section (8.5) of the CBA of policy options for an NPS-UDC (CBA), which states:

....there may be unintended consequences associated with the infrastructure planning, provision, and funding implications of objectives and policies in the NPS-UDC. These risks arise from the fact that infrastructure planning and RMA planning is governed by separate legislative frameworks, and also from the fact that some costs of providing and using infrastructure are not fully borne by users.

And at 8.5.1 the CBA considers these risks further:

“making land available for urban development without accompanying infrastructure is not likely to increase the supply of land and housing actually available for sale… such zoning does not increase effective supply, and is likely to have no impact on market dynamics… consequently infrastructure may need to be provided for land that has been zoned in excess of current demand”.

The CBA discusses the need to take account of the fact that some land capacity might be deemed uneconomic for development (by the market), and that more land should to be available than is actually needed (to allow for some competition), leading to a situation where,

“the infrastructure requirements and costs may… double… raising questions about over who will fund such infrastructure provision”.

So, to deliver national policy statement developable urban land aims and to comply using the mechanisms and methods set out in the NPS – will require TLAs to find some way of funding infrastructure for more land than is actually needed at any point in time. This runs counter to any notion of a the good-enough and just-in-time approach practiced by most New Zealand TLAs, and in any case will be wasteful of scarce public funds. The NPS needed tools for fund raising and cost recovery, and that incentivise development of available land (eg the PM's idea of compulsory purchase - without it the NPS lacks teeth and credibility. I suggest that many of the reporting provisions in the NPS simply give the Minister a stick to hit councils with - and little else.)

Land banking

The CBA contains advice which is of considerable concern. S.8.2.2.3 states,

“analysis suggests that there may be large differences between plan-enabled capacity or market-feasible capacity and the development that actually occurs”

(emphasis not added), and suggests a rule of thumb (CBA words - not mine),

“it appears necessary to provide plan-enabled capacity for three to ten dwellings in order to enable a single dwelling to be developed over a ten year period.”

This is a startling and deeply concerning finding. The CBA provides explanation as to why this might be the case for brownfield redevelopment, but it also notes,

“greenfield capacity can still be taken up relatively slowly as developers may stage construction to avoid reducing prices”,

citing UK development reviews that found evidence,

“that developers voluntarily ‘withhold’ new supply if other suppliers in nearby locations are also building”.

I am surprised that these revelations survived the scrutiny that a government document like this must've been through. However at least this information is now public and from an extremely credible source. The primary mechanism
that the NPS-UDC uses to try and bring zoned capacity in line with the need to
"over-zone" to enable an efficient development market (ie one where competition can actually function) includes the
15-20% "sufficient buffer", but is primarily the requirement to assess physical and
commercial feasibility of zoned capacity. A pure market economy approach appears to require "over- zoning", however over-supply of capacity is inevitably inefficient and wasteful.

The NPS does not provide national guidance on policy to avoid land banking. Methods and powers need to be made available to local government to give it the confidence to release land that is supported with publicly funded infrastructure.

Give us (and them) strength.

No comments:

Monday, July 25, 2016

NPS CBA Rule: 3 Houses need 10 Lots

Submissions to the proposed National Policy Statement Urban Development Capacity were due ten days ago or so. It will - of course - be interesting to see what emerges, though the import of that policy initiative is somewhat dwarfed by the public debate that has developed (Grimes, Brash ANZ Bank CEO etc).

Nevertheless, incremental changes will occur, and one hopes these might avoid chaos and catastrophic collapse which will ultimately affect people with little and low incomes far more than the wealthy and even the banks if we are to believe the commentary.

It fell to my lot to do some detailed policy analysis of the proposed NPS. This took me into the 200 page Cost Benefit Analysis (CBA) of policy options prepared for MfE by a consortium of consultancies (including Covec, MR Cagney etc). This was a close typed and rather daunting document, which contained findings I'd like to share with you in this posting.

The announcement of the proposed National Policy Statement on Urban Development Capacity was followed by two significant central government statements relating to urban development. The Prime Minister announced the availability of $1 billion to fund growth related infrastructure (this announcement has been further qualified by the Minister of Environment that this fund could be allocated to the Huapai area of North Auckland). The second statement suggested the establishment of a government run Urban Development Agency in Auckland, with the further suggestion that the agency might have the power to compulsorily purchase land that has been land-banked and is being with-held from development.

It would have been appropriate to incorporate these ideas into the proposed Urban Development NPS. This would have provided an opportunity to consider each of the proposals, and how they inter-relate, in an integrated way, and have led to much more effective national guidance. But I digress, the CBA...

Infrastructure

Most commentators and analysts argue there is a fundamental disconnect between the Local Government Act and the RMA (and the LTMA) when it comes to infrastructure funding and planning. This is one of the key areas that should have been addressed in the National Policy Statement. The NPS presented an excellent opportunity for that. In fact this issue is addressed in the ‘risk of unintended consequences’ section (8.5) of the CBA of policy options for an NPS-UDC (CBA), which states:

....there may be unintended consequences associated with the infrastructure planning, provision, and funding implications of objectives and policies in the NPS-UDC. These risks arise from the fact that infrastructure planning and RMA planning is governed by separate legislative frameworks, and also from the fact that some costs of providing and using infrastructure are not fully borne by users.

And at 8.5.1 the CBA considers these risks further:

“making land available for urban development without accompanying infrastructure is not likely to increase the supply of land and housing actually available for sale… such zoning does not increase effective supply, and is likely to have no impact on market dynamics… consequently infrastructure may need to be provided for land that has been zoned in excess of current demand”.

The CBA discusses the need to take account of the fact that some land capacity might be deemed uneconomic for development (by the market), and that more land should to be available than is actually needed (to allow for some competition), leading to a situation where,

“the infrastructure requirements and costs may… double… raising questions about over who will fund such infrastructure provision”.

So, to deliver national policy statement developable urban land aims and to comply using the mechanisms and methods set out in the NPS – will require TLAs to find some way of funding infrastructure for more land than is actually needed at any point in time. This runs counter to any notion of a the good-enough and just-in-time approach practiced by most New Zealand TLAs, and in any case will be wasteful of scarce public funds. The NPS needed tools for fund raising and cost recovery, and that incentivise development of available land (eg the PM's idea of compulsory purchase - without it the NPS lacks teeth and credibility. I suggest that many of the reporting provisions in the NPS simply give the Minister a stick to hit councils with - and little else.)

Land banking

The CBA contains advice which is of considerable concern. S.8.2.2.3 states,

“analysis suggests that there may be large differences between plan-enabled capacity or market-feasible capacity and the development that actually occurs”

(emphasis not added), and suggests a rule of thumb (CBA words - not mine),

“it appears necessary to provide plan-enabled capacity for three to ten dwellings in order to enable a single dwelling to be developed over a ten year period.”

This is a startling and deeply concerning finding. The CBA provides explanation as to why this might be the case for brownfield redevelopment, but it also notes,

“greenfield capacity can still be taken up relatively slowly as developers may stage construction to avoid reducing prices”,

citing UK development reviews that found evidence,

“that developers voluntarily ‘withhold’ new supply if other suppliers in nearby locations are also building”.

I am surprised that these revelations survived the scrutiny that a government document like this must've been through. However at least this information is now public and from an extremely credible source. The primary mechanism
that the NPS-UDC uses to try and bring zoned capacity in line with the need to
"over-zone" to enable an efficient development market (ie one where competition can actually function) includes the
15-20% "sufficient buffer", but is primarily the requirement to assess physical and
commercial feasibility of zoned capacity. A pure market economy approach appears to require "over- zoning", however over-supply of capacity is inevitably inefficient and wasteful.

The NPS does not provide national guidance on policy to avoid land banking. Methods and powers need to be made available to local government to give it the confidence to release land that is supported with publicly funded infrastructure.

New Postings: Email Update

About Me

Enjoy the challenges of planning, especially urban planning, and the process of engaging with its endless problems. No easy solutions here! Unlike my earlier life in physics - but then, again, maybe its solutions are like sticking plaster. Previous life for 12 years as elected councillor in Auckland local government. Re-qualified at University of Auckland as urban planner. Now senior policy analyst at NZ Planning Institute.